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Hybrid Clouds are Transforming Financial Services: Are You Ready?

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Hybrid Clouds are Transforming Financial Services: Are You Ready?

By Anthony Gerace

The Financial Services industry has long understood that IT is more than just a utility that supports their business. Rather, the most forward-thinking financial institutions and FinTech start-ups recognize that when IT resources are strategically applied, IT has the power to fundamentally transform the business. Whether it’s compute, network or object-based storage, financial service IT leaders are under increasing pressure to invest in technologies that drive innovation. And few areas hold as much potential for disruption as hybrid cloud computing.

Building a Foundation for the Hybrid Future

Hybrid clouds are defined as a cloud computing environment that utilizes a mixture of on-premise private cloud and third-party public cloud services.

While other industries have made public and hybrid cloud computing initiatives investment priorities, financial service firms have approached these clouds with no small amount of caution. Chief among these concerns of course is data security and maintaining compliance with a variety of evolving regulatory requirements.

Anthony Gerace

Anthony Gerace

However, as public cloud platforms like AWS, Google and Azure continue to mature, business and application owners seeking opportunities to exploit new market opportunities are now the ones driving these cloud initiatives. A recent Gartner survey of senior finance executives found that by 2020, 36 percent of enterprises will use the cloud to support more than half of their transactional systems of record while 451 Research estimates that 60% of all workloads will run in the cloud this year.

Consequently, breaking down the silos between IT and the line of business owners has become all the more critical. As an increasing number of firms push to put newer solutions and greater control in the hands of the end user via public cloud services, they must do so in partnership with IT or risk running afoul of security and data governance requirements. Conversely, IT must be responsive to the demands of the business owners or risk losing further control to ‘Shadow IT’ projects.

Financial services CIOs are also under increasing pressure to reduce CapEx spending and shift their budgets to business transformation initiatives that enable the organization as a whole to be more agile (according to EY’s 2018 Global Banking Outlook, 85% of banks cite implementation of digital transformation as a key business priority for 2018.  With these objectives in mind, IT and the business both recognize the promise of hybrid cloud. But what does the roadmap to get there look like and what questions should be considered when embarking on this journey?

Hybrid Cloud Use Cases

As mentioned, financial services have unique requirements when it comes to leveraging public cloud resources. While many firms have invested heavily in their private cloud infrastructure over the past decade, they’ve been more selective about how and where they use public cloud platforms. The two primary areas where many have chosen to prioritize have been in compute and storage.

Compute represents the lowest hanging fruit for many organizations as platforms like AWS, Google Cloud and Azure have made it relatively simple and cost-effective to spin up a new cloud instance as demand spikes without having to overinvest in capacity. However, because it’s become so easy for application owners to leverage compute resources on-demand, IT is often overlooked and established security protocols are disregarded. That said, it remains a strong proof point that demonstrates how these types of hybrid cloud resources are no longer limited to the back office but are starting to be applied both with greater frequency and urgency across business units.

Storage represents another key opportunity — and challenge — for financial service firms in their quest for greater operational efficiency. These firms generate massive amounts of data which they not only have to keep secure but also must make readily available for analysts, portfolio managers, and software developers to perform real-time analysis and keep their models up to date. However, not all data is created equal which creates an added layer of complexity.

Some data such as end-of-day records and trading statements must be retained for a period of years and doesn’t need to be accessed on a regular basis. Meanwhile other data types such as reports generated by proprietary trading applications needs to be retrieved frequently as users and regulators require it. Public cloud providers also charge egress fees to customers which are incurred every time data is transferred from the provider back to the customer – these fees are not only costly but the sheer volume of data being stored in these public repositories makes retrieving it untenable. Instead, many of these firms are opting for using dedicated storage devices for data that require frequent access and only using public cloud storage for archival data that is rarely needed.

In both of these use cases, one common thread is that organizations require a mature technology infrastructure that ensures persistent bandwidth availability and robust application performance. As financial service firms begin to increasingly rely on a mix of public and private cloud environments, partnering with the right fiber infrastructure vendors who can provide assurances of performance and availability represents a critical success factor.

Choose Your Partners Wisely

A successful shift towards a hybrid cloud corporate environment will require coordination and collaboration with a variety of different constituents – from public cloud providers and SaaS vendors to on-premise data centers, infrastructure and security vendors. Orchestrating all of these resources is perhaps the most challenging aspect of implementing a hybrid cloud solution which is why it’s so crucial to put the work in to select the right partners from the outset. This is especially true for the underlying infrastructure that will serve to unify a multi-cloud environment. Consider asking potential vendors some of the following questions in your evaluation:

  • How does your firm connect to the Cloud?
  • How much of the network footprint does your company own and operate?
  • How do you ensure route diversity in the event of a network failure?
  • How do you segregate workloads according to different cloud environments?
  • What security certifications do your data centers hold and what levels of technical support do you offer?
  • How many public cloud providers do you connect to and what type of APIs do you make available to customers to facilitate integration?

Hybrid clouds are not just transforming the way IT services are delivered but offer a unique opportunity for IT to partner with the business to maximize operational efficiency and drive new innovations to market. The financial service firms that make this investment a priority now will be poised to reap the benefits of a highly agile IT organization that can quickly respond to changing market conditions.

Anthony Gerace is the VP, Head of Financial & Professional Services for Zayo, a global provider of communication infrastructure services.

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Financial transformation is the new digital transformation

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Financial transformation is the new digital transformation 1

By Luke Fossett, ANZ Head of Sales for global recurring payments platform, GoCardless

The term ‘digital transformation’ has become somewhat synonymous with COVID-19. As teams and operations became decentralised, companies looked to quickly build their remote tech stacks, striving for ‘business as usual’ despite the circumstances.

But in the background of COVID’s chaos, different regions and industries experienced major changes, sparking a different breed of transformation beyond the digital spectrum.

Take Australia as an example. In July, the market saw the local arrival of Open Banking, as well as further detail into the regulated and planned transition away from the existing Direct Debit system to the central-backed New Payments Platform (NPP) and it’s Mandated Payment Service. With these changes comes the impetus for a wave of ‘financial transformation’; a term that describes the process of making financial operations, processes and outputs more efficient.

Despite its potential for broad interpretation, financial transformation has the potential to produce use-cases that drive value for the customer; from things like seamless payment experiences, to data-rich APIs and integrations, to managing real-time bank to bank payment and the automation of everything from customer acquisition to using data to retry a failed transaction on the date that gets the best success. These innovations are well within reach for enterprise organisations, however, to extract real value, business leaders need to plan their financial infrastructure in parallel with making digital investments.

With the right deployments, financial transformation can reap significant rewards from a customer and internal operations perspective – so here’s why business leaders should be paying attention:

Value speaks volumes to the C-suite 

Financial transformation benefits enterprise organisations as well as small and medium-sized businesses (SMEs) that need to create efficiencies as they scale, but translating its value is not always easy.

Payments are a complex part of any business, impacting many different consumer-facing and internal functions. Yet the role of ‘payments specialist’ is a rarity in most organisations.

Responsibility for financial transformation often falls – and gets lost – somewhere between the Chiefs of Technology, Information and Finance. That’s why leaning on platform providers and payments experts as early as possible, is key to understanding your customers and capabilities, before you implement and invest.

Outsourcing financial transformation initiatives is a much easier sell to enterprise decision-makers than redirecting IT resources to new DevOps projects. Credible payment providers, and the specialised knowledge that comes with good ones, are in most cases a more cost-effective solution than employing a full-time expert. Translating the value of financial transformation to achieve buy-in from the C-level boils down to maximising efficiency and return on investment (ROI).

A simple solution is using automation for tasks like streamlining processes, such as collecting payments on time without human contact. Find the sweet spot between how you want your customers to pay, and how they prefer to pay; then offer those options, while making sure they can be done with little to no touch internally.

Fintech-led transformation 

‘Best-in-class’ platform providers typically describe innovative fintech companies, who, as opposed to generalist banks, are deemed specialists in niche elements of financial services.

Again, using the example of Australasia, there are nearly 5,000 active fintechs, and it’s a market that legacy-laden big banks are tapping into. For example, Australia’s largest bank, the Commonwealth Bank of Australia, recently partnered with venture capital firm Square Peg, and AI-focused capital fund Zetta Ventures Partner;  pouring $AUD28 million into new financial technology that delivers better digital banking services to its customers.

Fintech-led transformation doesn’t only have to benefit the customer; it can offer significant value for financial teams too.

In an enterprise environment, choosing the right technology allows for slick front end payments, but the true value comes in optimising financial management behind the scenes.

Take the rising consumer demand for subscription services as a use-case. According to Zuora’s Subscription Impact Report, 50 per cent of all subscription companies are growing just as fast as they were before the pandemic, while 18 per cent are actually seeing subscriber growth rates accelerate. With this trend comes a rise in companies looking to invest in recurring billing platforms that make it easy to accept regular payments, however, finding a low-touch platform that offers the financial infrastructure to support subscription-based payments will generate much greater ROI. There is no point blowing budgets on a ‘rip and replace’ billing platform if internally, finance teams still have to revert to a manual process of uploading payment files in a spreadsheet.

The future is financially transformed

The Reserve Bank of Australia’s latest Consumer Payment Behaviour survey shows that in 2007, cash was used for 69 per cent of all transactions, while last year it accounted for just 27 per cent. Additionally, over 50 per cent of Australian businesses prefer bank-to-bank payments, known as Direct Debit, over credit cards as a way to collect payments.

Payment preferences are rapidly evolving, and keeping up with consumer payment trends is key to staying competitive. To be effective, however, you need to have the infrastructure to support and accept diverse payment methods.

‘Payments as a Service’ (PaaS) is a phrase used to describe platform providers that connect multiple payment systems, enabling companies to offer several payment options while replacing outdated practices like paper-based Direct Debit.

In 2020, the most successful enterprises are utilising PaaS providers, built for self-serve and high rates of conversion. Take Bulb, for example; the UK-based energy company allows users to sign-up, switch energy providers and lock-in their payment preferences, all in under two minutes. Better yet, the process requires almost no people management.

Taking a visionary lens on financial transformation means building greater payment efficiencies for both the customer and the enterprise. Additionally, the specialist and agile nature of fintech platforms puts the organisations who use them on the cutting-edge of innovation, future-proofing operations in a fast-moving market without significant investments in research and development.

Best-in-class platform providers are driving financial transformation change; helping business navigate and plan so they are prepared for today, and for what’s coming.

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RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA

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RegTech 2020: Exploring financial crime and the emergence of RegTech in the USA 2

with host, Alex Ford, VP Product and Marketing, Encompass, and guests, Dr Henry Balani, Head of Delivery, Encompass; Pawneet Abramowski, Chief Compliance Officer

Today, financial institutions deal with increasingly complex transactions and regulations that are continually changing. For the financial services industry, the cost of regulatory obligations has dramatically increased in recent years and, as a result, there has been a strong demand for more efficient reporting and compliance systems to better control risks and reduce compliance costs.

The complexity of regulation has made it more difficult for compliance and legal teams to manage risk. Also, the rise in large monetary fines, the impact of reputational damage, personal liability and even prison sentences have all played a factor. However, it remains essential that RegTech and AI is not seen as the only answer to addressing all financial crime risk, but rather a tool that, if used properly, can create more efficiency in the management of money laundering, bribery, corruption and fraud.

This month’s insightful and thought-provoking RegTech 20:20 podcast, from Encompass Corporation, delves into these topics from a US perspective, as guests, Dr Henry Balani, Head of Delivery, Encompass, and Pawneet Abramowski, Chief Compliance Officer. Pawneet has more than 17 years of combined experience in both public and private sectors with a focus on compliance and Henry has experience supporting innovative technology solutions that address issues of financial crime and money laundering. He advises technology firms as a Non-Executive/Board Director.

Encompass Corporation aims to demystify RegTech for listeners and understand what practitioners and experts are doing to overcome organisational challenges. This time,

Pawneet discusses how the US is at the forefront of the utilisation of technology, while also reflecting on the long history of money laundering and financial crime there, saying that “the birth of RegTech in the last 5-7 years has been really prominent in the United States”.

Henry, having had more than 25 years’ of financial services industry experience, speaks about how so many transactions worldwide are cleared in a US bank and how the US dollar is a powerful weapon, especially when money laundering comes into play.

When asked about her thoughts on technology assistance, Pawneet suggests that organisations are having to continuously evolve their programme and controls, telling the audience: “I think that’s where this desire for having technology assist in making things more efficient and operationally effective”.

Henry gives listeners an insight into regulatory penalties being a driver in changing behaviour, suggesting that this type of enforcement is a successful method.

 “…as we see the increasing use of these penalties, organisations are noticing the reputational damage as embarrassing. We have seen a lot of these companies coming to RegTech firms asking for solutions to help them identify these potential challenges and issues”

Later on in the podcast, he goes on to speak about the challenges for regulated banks in the US. Breaking down the latest data and survey figures, Henry insists that the US has huge workforces in this organisation of growth. “To be a compliance professional, you are certainly in huge demand.”

Technology advancement is increasing at a rapid rate in the US. Regulated firms have a challenge not only to stay ahead of criminals, but there is often a rush to introduce new technology and continue to improve the experience of customers. Regulated bodies in the US, especially banks, have long been reinventing and adapting their compliance programmes to meet both their legal and community obligations and, as Pawneet explains, “it feels like a constant regulatory revolving door as a compliance professional”.

More expert commentary, RegTech conversation and industry insight can be found in the full episode of RegTech 20:20. You can listen here  https://www.encompasscorporation.com/regtech2020-podcast/, and across all major podcast players

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86% of UK businesses face barriers developing digital skills in procurement

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86% of UK businesses face barriers developing digital skills in procurement 3

A shortage of digitally savvy talent, and a lack of training for technical and soft skills, hinder digital procurement initiative

Research from Ivalua, a leading provider of global spend management cloud solutions, has shown that a majority of UK businesses (86%) face significant barriers developing digital skills in procurement. The findings reveal that a shortage of digitally savvy talent (31%), a lack of training for technical and soft skills (28%) and a lack of understanding of the skills required (13%), are some of the main barriers preventing UK business from developing the digital skills they need. Additionally, over half (55%) of UK businesses say that digital skills in procurement are less advanced compared to other departments

The research, conducted by Vanson Bourne on behalf of Ivalua, surveyed 200 UK-based procurement, supply chain and finance professionals about the true nature of digital skills within procurement, and the challenges businesses looking to digitally transform will face. More than eight-in-ten (84%) UK businesses believe that the skill set required of procurement professionals has shifted from procurement-first to digital-first. The study also highlighted that most respondents believe that greater digitalisation (84%) and better digital skills (83%) in procurement would have enabled UK businesses to mitigate the impact of the COVID-19 outbreak more effectively.

“Over the last decade, the role of procurement has transformed from one of cost-cutter to a vital ally that can help inform and enable a business’s strategy. The global COVID-19 pandemic accelerated this trend even further, reinforcing the importance of procurement as businesses adapt to the new normal,” commented Alex Saric, smart procurement expert at Ivalua. “However, for too long, procurement has been seen as a digital laggard, with technology adoption trailing behind other departments. In order to keep its seat at the table in strategic discussions, procurement must ensure it has people with the right skills in-house, as well as easy to use technologies, or risk being unable to offer significant strategic value.”

Challenges in hiring digital skills in procurement

As part of ongoing digital transformation efforts in procurement, the report found that UK businesses have started to introduce new technologies such as data analytics (55%), cloud-based platforms (53%), automation (35%) and AI/machine learning (30%) in the last 12 months.

But when it comes to deploying these technologies, UK businesses are finding it difficult to complement them with the digital skills required. The study found that 88% find it challenging to hire the right digital skills to work with technologies such as AI, cloud-based platforms or data analytics, while 76% say they are concerned that existing procurement teams will struggle to work with new technologies. Developing digital skills is vital for businesses, as 91% of respondents say that improving digital skills can make procurement more strategic, while 94% say it will help them gain a competitive advantage.

“In a rapidly evolving business environment, digital skills are essential for procurement teams to analyse and mitigate risk, identify new opportunities and collaborate with suppliers. However, procurement teams are struggling to both attract digital talent and upskill existing teams, which puts them at risk of falling behind competitors, losing market share, and struggling to identify risk and opportunities ahead of time,” comments Saric.

“To address the digital skills gap in procurement, UK businesses need to ensure they are focusing on adopting tools that are easy to use and improve access to actionable insights. By making procurement smarter, businesses are giving teams the tools and skills needed to thrive in the new normal, allowing the business to react and proactively address the shifting sands of a post-COVID world.”

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